Bond price and yield calculator
Price a fixed-interest bond from its yield, or back the gross redemption yield out of a market price, with the risk measures the exams ask for: running yield, duration, volatility and convexity.
Price is the present value of the coupons plus redemption at the gross redemption yield (effective annual; coupons paid in arrears). Duration is the discounted mean term of the cash flows; modified duration approximates the % price fall for a 1% yield rise, and convexity corrects that approximation for larger moves. Above (below) par when the coupon outruns (lags) the yield.
Reading the risk measures
Duration (the discounted mean term) is the average time you wait for the bond's money, weighting each cash flow by its present value — long bonds and low coupons push it up. Modified duration turns that into price sensitivity: a 1% rise in yield knocks roughly that many percent off the price, and convexity is the curvature correction that makes the estimate honest for bigger moves. Immunisation questions are exactly these quantities matched between assets and liabilities.
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